Since the judge ruled in favor of United Airlines, and against their employees, I must continue with the comments made two weeks ago. Pity the United retirees and retired. The brass at UA, has decided to try to keep the ship afloat, even though it is taking on water far faster than the bilge pumps are removing it. The interest on the debt is more than current profits, and the debt keeps growing. If the persons who are in charge of United Airlines had any sense of decency, they’d just throw in the towel, sell the remaining assets, pay off everyone, and get out of town. Oh no! They think they can continually defraud their creditors and now their loyal current and retired employees, and keep the sinking ship afloat. I am certain that there are plenty of assets left, which could be sold to pay employees what has been withheld for their retirement, and pay off retirees what they are owed, or at least a healthy portion. Why not charge fares that cover costs? What kind of business deliberately sells merchandise at below what it costs? You say they will lose their business? Well, selling below cost is a hell of a way to achieve prosperity.
Don’t blame deregulation either, as it has nothing to do with it. There are simply too many airlines covering the same distances, and at virtually the same schedules. They cut each other’s throats to get that last passenger, and are killing themselves, their stockholders and retirees as well, plus the foolish banks, who loaned them billions. If United can’t make it, fine! Let the rest cut each other’s throats, till someone has brains enough to charge a fare that covers costs. And while we are at it, why not make the airlines pay their airport costs? They pay but a fraction of what it costs to run airports, and air traffic control systems. The taxpayers make up the rest already, so now we are going to have to pay their retired employees? I believe the airlines are run by a bunch of idiots, and it serves them right. The court should have denied United’s request, and made them sell their assets to pay what they owe and promised.
The UA default will simply spread to other airlines, and then to GM, Ford, and who knows what or who else? There are 44 million retirees depending on numerous pensions for their well-being, for the rest of their lives. If the pension system collapses, the Government outfit that assumes the defaulted pensions, is already $22 billion in debt, and by adding numerous other defaulted pensions, will it survive? Yes it will, just like the FDIC would survive if banks went broke. How? Simple. Just start the presses and everyone will get their dollars, posthaste. Isn’t that grand now? Everyone gets their dollars, but they become a bit more worthless every day. Your dollars are secure, but not their value.
We might be seeing the beginning of a melt-down in the economic system, and here’s how it might possibly happen, and for that mater already has begun: We, once again, must go to Stott’s Law, and that is, “The More of Anything There Is, The Less They Will Be Worth.” This includes dollars, quite naturally. What then, could be the cause of huge numbers of dollars being printed, (placed in circulation in various ways)? Obviously, the need for them. If the Government guarantees trillions of dollars in pensions, even at reduced rates, where will the bucks come from? The presses will run overtime to meet the demands. Everyone will get their dollars, even though they will buy less as each time period passes. Not only the pension expenses, but millions of baby-boomers drawing Social Security, hundreds of millions in foreign aid, hundreds of billions for Iraq and Afghanistan, hundreds of billions in welfare, and other nonsense, paints a pretty glum picture, as far as the increase in dollars is concerned, doesn’t it?
Since the retirees will be receiving far less than they were promised, obviously, they will spend less than they would, if they were funded 100% of the promised amount. A retired pilot will get $45,000 a year, rather than the $125,000 or more he worked for, and was promised. Is he going to run out and buy a new Mercedes? Is he going to take his wife out to eat as much as before? If one or two airlines cease to exist, their ex-employees will spend little, because they are out of a job. Wisconsin alone, has lost 90,000 jobs to overseas. If those still working, but knowing their retirements will be but a fraction of what was promised, will they begin to save and budget well in advance of retirement? Will they watch every dollar, and make them go as far as they can? Will this mean a slump in retailing, restaurants, travel, vacations, new home buying, new car buying, and other than basic spending? You bet. Could this make everything slow down to a crawl, economically? If this happens, and corporations show a drastic slow down in sales and profits, will their stocks go down?
If stocks go down, and what pension funds remaining, not to mention the rest of America, are heavily into them, what has, or will happen to the capital tied up in stocks? It will go down, down, down, and then the whole thing could go thud, with millions of innocents bankrupted. It has happened before. The under-exaggerated 25% unemployment rate in the 1930’s, could easily happen again. You know, I really despise writing stuff like this, and hope it never happens. I don’t wish anything bad for anyone. I just happen to be a realist, and can add two and two, and get four. There’s no question about my law, and they say the Social Security system is ’safe’ till heaven knows when. There is nothing in there but government bonds, which are being redeemed in, and denominated in dollars. Many of the Social Security recipients today, are worried that they might not continue to receive the checks, and youth, by a majority, feel that they might never get it. They will. I hope it doesn’t require a wheelbarrow full to buy a loaf of bread as it did in Germany in 1924.
It’s really difficult to imagine what the future could bring. Did anyone, in their wildest dreams, ever conceive 9/11? Mt. St. Helens explosion? Earthquakes? The recent tsunami? No. Were there signs of any of the preceding? Some, since earthquakes do occur in some places, and Mt. St, Helens did burp a bit, and expand. But the degree of these happenings could never have been imagined. Look people, everyone knows the dollar is being printed lickety split, and without end. Everyone knows the trade deficit grows each month, and the pension melt down can surely be imagined. These companies and corporations have no money, and can’t pay what they promised. The natural trend will be to “go to the government,” and especially since United Airlines has already succeeded in sloughing off their legitimate pension responsibilities. Will others follow? Is the Pope a Catholic? Will this save United Airlines, General Motors, or Ford? Did it save US Steel, or Bethlehem Steel? If you are billions of dollars in debt, and it is growing, will getting rid of the pensions bring relief? Hardly. It just postpones the inevitable.
The inevitable, is that many, if not all pensions of large corporations will be thrust into government’s hands, they will pay half of what is owed, and in decreasing value dollars. The 44 million who depend on their pensions, are a large portion of the US economy. If they pay half, that’s half of the spending power of these geezers being taken away. Will this cause mayhem in the US economy? Could it possibly become a chain reaction? If it waddles, quacks, and has web feet, is there a possibility it could be a duck?
Not to be repetitious, but if you think your pension is safe, and you are offered a nice cash settlement to relieve your former employer of his duty, I’d advise that you take it and place those dollars in something not denominated in dollars. This means absolutely no bonds, T-bills, or an insurance company’s offer to pay you so much a month for the rest of your life in an annuity. Those annuities pay exactly the same amount of dollars each month, just like they agreed to do. Till you die. All the while the dollars buy less and less. Get the point? Things not denominated in dollars are stocks, gold and silver, real estate, antiques, or collectibles. Maybe others which I can’t think of now. Real Estate is surely a bubble waiting to deflate. Stocks, according to Richard Russell, are not at a buy level now, due to high P/E ratios. Collectibles and antiques? Sure, except they’re not readily saleable if the need arises, but they can give a lot of pleasure. Gold and silver? Well, I won’t go into that, because I am highly prejudiced, and always practice what I preach. Protect yourself.